Alleged mortgage fraudsters win money laundering appeals

A recent Court of Appeal judgment demonstrated the limits of the money laundering legislation.

It was alleged that mortgages had been obtained fraudulently by false statements on the mortgage applications.  A number of these allegedly fraudulent applications had been handled by the same mortgage broker.

The individual applicants could have been charged with obtaining a money transfer by deception contrary to s15A Theft Act 1968 or fraud by false representation contrary to Fraud Act 2006 (which replaced the earlier offence).  The broker could have been charged with the same offences (which apply equally to obtaining money or property for someone else) or with conspiracy to defraud.

All of these offences necessarily involve dishonesty.

But instead the applicants were charged with acquiring criminal property contrary to s329 Proceeds of Crime Act 2002 and the broker was charged with entering into an arrangement to facilitate the acquisition of criminal property by another contrary to s328 PoCA 2002.

The PoCA 2002 offences (which are both 'money laundering' offences) do not need to involve dishonesty.  The prosecution may therefore have thought it would be more straightforward to obtain convictions for these offences.

All the defendants were duly convicted and they appealed.  All the convictions were quashed on appeal.  But why?

Well it was undoubtedly the case that, if the mortgage applications were fraudulent, the mortgage advance monies were proceeds of crime in the hands of the applicants.  But they were not proceeds of crime until the applicants had received them.

So the broker was not involved in an arrangement for the applicants to obtain proceeds of crime - the arrangement was to obtain legitimate monies belonging to the lenders.  It was only after the arrangement had been successful that there were proceeds of crime.

It was irrelevant that, had the defendants been charged under different legislation, they would very likely have been convicted.

The defendants' conduct, said the judges in the Court of Appeal, did not fall within the s328 and s329 offences (which envisaged that crime of some sort had occurred before the arrangement was made or the money was obtained).

(Subsequent transfer or use of the monies fraudulently obtained by the applicants might well be money laundering offences - but there were not charged with that.)

Furthermore, by giving security for the mortgage advances, the applicants had provided adequate consideration for the monies which they had received - and therefore the exemption of s329(2)(c) applied to their acquisition of the monies (notwithstanding that false information regarding income and employment may have been entered on the mortgage application forms).

The judgment in the case is R v Amir & Akhtar [2011] EWCA Crim 146.

David

Comments
carnmores's picture

at last

carnmores | | Permalink

some sense

How does this apply to similar cases?

Oracle | | Permalink

 I'm thinking of the recent(ish) high profile Christopher Farrell case

http://www.dailymail.co.uk/tvshowbiz/article-1336862/The-Apprentices-Christopher-Farrell-charged-4-counts-fraud.html

He was convicted of 4 counts of "false representation" so was he was tried under the Fraud Act 2006?

Also in the Christopher Farrell case would the individual mortgage applicants have found themselves being prosecuted?

carnmores's picture

alleged

carnmores | | Permalink

no more!

davidwinch's picture

Christopher Farrell

davidwinch | | Permalink

I understand that Chrisopher Farrell pleaded guilty to four counts of fraud by false representation contrary to the Fraud Act 2006 (and asked for 3 further matters to be taken into consideration).  He was given a suspended prison sentence and ordered to do 200 hours community service.  As far as I am aware no confiscation order is to be made in his case.

The point in my article above only concerns money laundering charges under the Proceeds of Crime Act 2002 and so does not relate to Mr Farrell.

I understand Mr Farrell says that the mortgage applicants were not aware that he had submitted applications on their behalf to which he had added false information and documents.  On that basis there is no possibility of the individual mortgage applicants being prosecuted.

David

In a nutshell...

Oracle | | Permalink

what I was getting at is that, on the face of it, the case of Amir & Akhtar and Christopher Farrell are  similar i.e

"mortgages had been obtained fraudulently by false statements on the mortgage applications".

(My intention was just to use the Farrell case as an example of a similar case)

So, aside from Christopher Farrell's plea and his statement exonerating the mortgage applicants, had he been prosecuted under MLR law,as opposed to the Fraud Act 2006, it's possible that there would have been 5 defendents (CF + the 4 counts) and the outcome would have been the same as that of Amir & Akhtar. Is that correct?

In fact, if Farrells case were to land in court tomorrow and he were being charged under MLR law, would the Amir & Akhtar case be cited as a precedent by the defence?

If, as you say, this case highlights weaknesses in the law, can we expect to see amendments as a result of this case?

 

 

davidwinch's picture

As I see it . . .

davidwinch | | Permalink

In the cases of Amir and Akhtar the prosecution hoped to make life easier for themselves by prosecuting under money laundering law rather than fraud law.

That would be easier because to prove fraud you have to prove dishonesty - but you don't have to prove dishonesty in money laundering cases.

But their plan backfired because in the particular circumstances they were required, under money laundering law, to show that the monies in question were proceeds of a crime of some description BEFORE they were obtained by the defendants.  That requirement had not been understood by the prosecution before they decided to opt to go for money laundering charges against Amir & Akhtar.

Had they done the 'obvious' thing - prosecuting under the Fraud Act 2006 or the Theft Act 1968 - Amir & Akhtar would have been convicted (just as Farrell was).  But instead they did the 'clever' thing - prosecuting for money laundering - and ultimately the convictions were overturned.

So it's not, in my view, the case that the law needs to be changed - it is the case that prosecutors need to act sensibly in selecting just what charges to bring in particular circumstances.

If tomorrow the prosecution go down the money laundering route in a new case then, yes, the defence will refer the court to the judgment Amir & Akhtar and an acquittal will follow (but one would expect the prosecution to have the sense not to repeat the mistake that was made in Amir & Akhtar).

It is often the case that - in a particular case - when the facts are looked at the alleged offender could be charged with a variety of different offences.  Part of the job of the Crown Prosecution Service is to assist the police by saying what precisely the alleged offender should actually be charged with (or in some circumstances whether he should be charged with anything at all).

For example, a car is driven at 50 mph in a 30 mph area, collides with another vehicle and someone is injured.  Should the driver be charged with speeding, or driving without due care and attention, or dangerous driving, or several offences, or something else, or nothing at all?  The CPS would advise based on the evidence (with a view to the charge reflecting the seriousness of the conduct, the best chance of obtaining a conviction on the available evidence, and the best use of public money).

David

b.clarke's picture

T'was ever thus

b.clarke | | Permalink

"...it is the case that prosecutors need to act sensibly in selecting just what charges to bring in particular circumstances."

There was the case of 3 people (A, B and C) involved in supplying doormen to clubs etc. A and B organised and controlled the doormen and dealt with the clubs, and C was just a paymaster. A, B and C decided that they were going to get clever and avoid the need for pesky PAYE/NIC deductions. C set up a company, A and B paid a weekly cheque to C's company, so that C could then pay the doormen gross.

I'm not a lawyer, but wasn't there a potential in that case for a conspiracy charge? The actual charge was cheating the revenue. But as C wasn't an employer (even the prosecution's own case summary demonstrated that ...) there was no obligation on him to deduct PAYE/NIC and he therefore had not cheated the revenue of anything.

I always put it down to an overworked prosecution.

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